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“Exchange, exchange.” Under the scorching heat, dozens of currency traders are hawking American currency along Florida Street, a lively pedestrian strip in Buenos Aires. Known as arbolitos (“small trees”), they are thriving before the October 26 congressional elections in a country accustomed to saving in the greenback.

“The optimal moment to buy is now,” states one arbolito, refusing to provide her identity. “[The dollar] went down slightly but it is a fake-out – it will rebound.”

Similar to her, economic experts from all backgrounds anticipate a depreciation of the national currency after the voting concludes. The president has placed a limit on the peso to tame soaring price increases and now it is artificially high and reserves are exhausted, leaving Argentina’s economy sluggish as consumers opt for cheap imports.

Fertile Ground

The nation represents a unique situation. The country has been repeatedly racked by sovereign defaults and economic crises and its voters have been susceptible over the years to left-leaning populist movements, such as the influential Peronism, and currently the president’s rightwing version.

The president epitomizes populist leadership: charismatic, unconventional, vowing muscular policies to reclaim command of the economy from the establishment on behalf of ordinary citizens.

These defining traits are shared by his ally in the United States, as well as the UK politician, who styles himself as a pint-swilling people’s champion even though he is a public school-educated ex-finance professional.

Until recent months, Milei’s approach – involving widespread sell-offs and severe budget reductions – had won plaudits from international lenders for helping to control price rises in check. This plan has something in common with that of his political hero Margaret Thatcher, who similarly viewed rising prices as a monster to be defeated, no matter the cost.

But financial markets began losing confidence in the government’s agenda in recent months after a shaky result in local polls and a series of graft allegations. Only massive financial intervention from abroad has averted what seemed destined to be a major currency crisis.

Contradictions

The 2016 referendum in 2016 likely contained some of the same logic, and its figurehead, the former prime minister, dismissed doubts regarding fiscal impacts with a bullish determination to implement public demand in the face of elite opposition.

The Reform leader has so far committed few policies in writing aside from a call for mass deportations, which he subsequently appeared to revise on the hoof. He wants to curb the Bank of England, perhaps even replacing its head, the incumbent, with scepticism of a stodgy establishment as a central element of populist rhetoric.

His tax and spending policies appear to be in flux: concerned about being accused of planning reckless spending, he recently dropped a promise to make significant tax cuts. His second-in-command, the party chairman, stated they would concentrate instead on public spending cuts.

The opposition hopes this stance will allow it to portray the populist as planning to bring back austerity – an argument Rachel Reeves has made repeatedly, comparing it unfavorably to her approach of increasing public investment.

An economics professor says there are contradictions in Farage’s economic programme, such as it is. “Reform are bankrolled by very wealthy people demanding tax cuts and reduced rules, yet also emphasizing the complaints of working people and the decline in manufacturing employment,” he explains. “There is a conflict there between wealthy supporters who want Thatcherism on steroids, and this story of bringing back British jobs and reindustrialisation.”

Holding on to Power

In truth, research indicates populists of any stripe often perform poorly when confronting real-world challenges (although each charismatic individual promises distinct solutions).

Recent research in the American Economic Review examined the performance of dozens of populist leaders, over more than a century. It found typically, over the long term, gross domestic product per head tends to be 10% lower in countries run by populist leaders compared to similar economies under conventional leadership.

“Financial decline, decreasing macroeconomic stability and the decay of governance typically go hand in hand under populist governments,” argue the paper’s authors.

Another intriguing finding of the research, though, is even with their negative impacts, these leaders tend to be good at retaining office, lasting on average a considerable time, versus four for mainstream politicians.

In other words, it remains uncertain whether even if their plans crash, such leaders face immediate consequences in elections. Similar to pledges made to “take back control”, their attraction reaches beyond everyday financial matters.

Yet back in Buenos Aires, whether the government’s agenda fails or is sustained by external aid, Argentina’s citizens have already paid significant costs.